Dominion Power 2007 Annual Report Download - page 39

‰A $131 million increase in sales to retail customers due to
an increase in the number of cooling and heating degree
days. As compared to the prior year, we experienced a
15% increase in cooling degree days and a 10% increase
in heating degree days;
‰An $80 million increase in sales to wholesale customers;
and
‰A $42 million increase resulting primarily from higher
ancillary service revenue reflecting higher regulation and
operating reserves revenue received from PJM.
‰A $511 million increase for merchant generation operations,
primarily reflecting higher realized prices for nuclear and fossil
operations ($363 million), including higher capacity revenue
associated with new capacity markets in ISO New England
and PJM, and increased volumes for fossil operations ($148
million); and
‰A $134 million increase in gas sales by retail energy marketing
activities due to increased customer accounts ($188 million),
partially offset by lower contracted sales prices ($54 million).
This increase was largely offset by a corresponding increase in
Purchased gas expense;
‰An $88 million increase in gas transportation and storage
revenue primarily attributable to our gas distribution oper-
ations due to increased volumes and higher prices; and
‰A $68 million increase in electric sales by our retail energy
marketing operations due to higher volumes ($31 million)
and higher sales prices ($37 million). This increase was more
than offset by a corresponding increase in Electric fuel and
energy purchases expense.
Operating Expenses and Other Items
Electric fuel and energy purchases expense increased 8% to $3.5
billion, primarily reflecting the combined effects of:
‰A $93 million increase for utility generation operations. The
underlying fuel costs, including those subject to deferral
accounting, increased by approximately $501 million due to
higher consumption of fossil fuel and purchased power result-
ing from an increase in the number of heating and cooling
degree days, higher commodity costs and a change in gen-
eration mix. This increase was largely offset by a $408 million
decrease primarily due to the deferral of fuel expenses that
were in excess of current period fuel rate recovery;
‰An $86 million increase for our merchant generation oper-
ations primarily due to higher commodity prices and
increased fossil fuel consumption; and
‰A $72 million increase related to our retail energy marketing
operations, as discussed in Operating Revenue.
Purchased gas expense decreased 6% to $2.8 billion, primarily
due to the following factors:
‰A $248 million decrease in costs attributable to gas dis-
tribution operations, as discussed in Operating Revenue; and
‰A $97 million decrease related to E&P operations, as dis-
cussed in Operating Revenue.
These decreases were partially offset by:
‰A $124 million increase associated with retail energy market-
ing activities, due to higher volumes ($168 million), partially
offset by lower prices ($44 million), as discussed in Operating
Revenue; and
‰A $50 million increase associated with our producer services
business, due to the net impact of an increase in volumes and
lower prices.
Other energy-related commodity purchases expense decreased 75%
to $252 million, primarily attributable to the following factors,
which are discussed in Operating Revenue:
‰A $409 million decrease related to E&P operations;
‰A $310 million decrease in the cost of nonutility coal sales;
and
‰A $51 million decrease in the cost of sales of emissions allow-
ances held for resale.
Other operations and maintenance expense increased 53% to $4.9
billion, resulting primarily from:
‰A $541 million charge predominantly due to the dis-
continuance of hedge accounting for certain gas and oil
derivatives and subsequent changes in the fair value of these
derivatives as a result of the sale of our U.S. non-Appalachian
E&P business;
‰A $387 million impairment charge related to the sale of Dres-
den;
‰A $231 million charge related to the termination of a long-
term power sales agreement at State Line;
‰A $171 million charge primarily due to the termination of
VPP agreements as a result of the sale of our U.S.
non-Appalachian E&P business. We have retained the
repurchased fixed-term overriding royalty interests formerly
associated with these agreements;
‰A $124 million increase in salaries, wages and benefits expense
primarily resulting from higher incentive-based compensation
($100 million) and higher salaries and wages ($83 million),
partially offset by lower pension and medical benefits expense
($59 million);
‰A $96 million increase in outage costs, primarily related to
scheduled outages for both utility and merchant generation
operations;
‰A $54 million increase due to a decrease in gains from the sale
of emissions allowances held for consumption;
‰A $54 million increase resulting from litigation-related charg-
es;
‰A $48 million increase in bad debt expense for gas dis-
tribution operations, primarily related to low income energy
assistance programs and an increase in sales volumes. These
expenditures are recovered through rates and do not impact
our net income;
‰A $31 million increase primarily due to the inclusion of cer-
tain FTR proceeds in Electric fuel and energy purchases expense,
beginning July 1, 2007, as a result of the reapplication of
deferred fuel accounting for the Virginia jurisdiction. These
FTR proceeds are used to offset congestion costs associated
with PJM spot market activity incurred by our utility gen-
eration operations; and
‰A $23 million increase related to outside services for tree
trimming and brush removal and other expenses.
These charges were partially offset by the absence of the following
2006 items:
‰A $166 million charge related to the write-off of certain regu-
latory assets in connection with the planned sale of Peoples
and Hope; and
Dominion 2007 Annual Report 37